Exchange Rate Closes at 1,299.7 Won, Plunging 19.1 Won...Below 1,300 Won for the First Time in Four Months (Summary)

[Image source=Yonhap News]

[Asia Economy Reporter Seo So-jeong] The won-dollar exchange rate plummeted by nearly 20 won following remarks by Jerome Powell, Chairman of the U.S. Federal Reserve (Fed), suggesting a possible slowdown in the pace of interest rate hikes.

According to the Seoul foreign exchange market on the 1st, the won-dollar exchange rate closed at 1,299.7 won, down 19.1 won from the previous day's closing price. This is the first time in about four months that the exchange rate has closed below the 1,300 won level since August 5 (closing price 1,298.3 won).

The exchange rate opened at 1,301.0 won, down 17.8 won from the previous day's closing price, and fell below 1,300 won in the early trading session. Although it rose to as high as 1,307.8 won at one point, it turned downward again in the latter part of the session and closed in the high 1,290 won range.

The sharp drop in the exchange rate on this day was due to a revival of risk appetite following Powell's remarks. Powell suggested at a speech at the Brookings Institution, a Washington think tank, that the Fed might slow the pace of interest rate hikes.

Powell said, "Once we reach a sufficiently restrictive level to bring down inflation, it is reasonable to slow the pace of rate hikes," adding, "The timing to ease the pace of rate hikes could be as early as the December meeting."

However, Powell added, "Despite some progress, there is still a long way to go to restore price stability," and "It will be necessary to maintain restrictive policy levels for some time to achieve price stability."

Oh Chang-seop, a researcher at Hyundai Motor Securities, said, "Expectations that the policy rate pivot will occur earlier than anticipated have grown, causing U.S. long-term bond yields to decline," and added, "In addition to Powell's remarks, foreign investors' net purchases of domestic stocks also influenced the supply and demand side."